1. As a manager of Kingstown Office Supply, you intend to purchase a new copier for Php500,000, whlch will last for three years. The company expects to save Php200,000 in the first year, Php200,000 in the second year, and Php100,000 in the third year with the new copier. The copier can be sold to a junk dealer for Php50,000 after three years. Altematively, the management can put the Php500,000 Into a 5% guaranteed interest account. Should you buy the copier or invest the money at 5% to maximize profits?
1. As a manager of Kingstown Office Supply, you intend to purchase a new copier for Php500,000, whlch will last for three years. The company expects to save Php200,000 in the first year, Php200,000 in the second year, and Php100,000 in the third year with the new copier. The copier can be sold to a junk dealer for Php50,000 after three years. Altematively, the management can put the Php500,000 Into a 5% guaranteed interest account. Should you buy the copier or invest the money at 5% to maximize profits?
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter26: Real Options
Section: Chapter Questions
Problem 5P
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